DoubleClick bore brunt of privacy backlash

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WASHINGTON (CBS.MW) -- DoubleClick may not have been the only Internet advertising firm with plans to combine names with the online habits of Web surfers, but it has certainly borne the brunt of growing consumer unease over online privacy.

Shares of DoubleClick last week began to recover from a drubbing that stemmed from a host of private litigation and state and federal regulatory probes into its data-collection practices. Relief was found after Kevin O'Connor, the company's chief executive officer, said DoubleClick would hold off on plans to merge names with anonymous Web-surfing information.

The company's plans to move ahead with such a program in the absence of guidelines formulated by industry and government representatives were "a mistake," O'Connor acknowledged.

Paying the price

In many ways, DoubleClick, which saw its stock tumble from above 110 in mid-February to below 80 before rebounding back into the mid-90s, was the juiciest target as consumer worries over online privacy issues began to mount. Shares of DoubleClick gained 4 11/16, or 5 percent, Tuesday to close at 96 3/16.

All Internet ad firms "want at some time to have a 360-degree view of the customer," said Tara Long, an analyst at C.E. Unterberg Towbin. "DoubleClick was the closest."

Its plans to link nonpersonal data gleaned from surveillance files, or "cookies," placed on Web users' computers when they visit a site, with names and other information from its recently acquired Abacus database helped spark a rash of lawsuits, Long said.

California resident Harriet Judnick filed a class-action lawsuit in state court in late January, claiming she was barraged with unsolicited e-mails after shopping for medical insurance online.

The lawsuit seeks no damages but instead calls on DoubleClick to destroy records on Judnick and install safeguards that will give consumers a choice as to whether their activities are tracked.

Meanwhile, the company faces similar suits in federal and state courts, largely centering on allegations consumers hadn't been adequately informed that DoubleClick was placing cookies on the computers of individual Web users.

Michigan's attorney general began legal proceedings against the firm, charging that its practices violated the state's consumer-protection law. The Federal Trade Commission and the New York attorney general are conducting informal probes of the company's data-collection practices.

DoubleClick has maintained that its practices violated no laws and benefited businesses and consumers. The cookies enable advertisers to target ads to Web surfers based on their demonstrated interests.

Other Internet ad firms that also use cookies to track Web surfing activities appear so far to have escaped similar litigation.

Rothken said he remains "absolutely mindful" of the activities of other Internet ad firms, but he contends that a successful case against DoubleClick would be enough to alter practices industrywide. The lawsuit seeks injunctive relief but no monetary damages.

Rothken said he hopes the court will prescribe relief that will balance the need for consumer privacy against legitimate business purposes.

Not painted with same brush

Meanwhile, privacy advocates contend that the Internet ad firms are beginning to feel the heat of increased consumer concerns over how closely their online activities are tracked.

David Moore, the chief executive officer of 24/7 Media
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DoubleClick's biggest competitor, issued a statement Monday that the company welcomes the "debate about Internet privacy issues."

"Most importantly, we wish to state emphatically that we have never merged anonymous clickstream data with personally identifiable data, and we pledge not to do so until our industry, working together with governmental agencies, establishes standards in this regard."

Moore said the company's practices have always complied with 24/7's privacy policies and all applicable laws.

C.E. Unterberg Towbin's Long predicted that the industry will manage to come up with a set of guidelines that will put regulators and legislators at ease. Internet ad firms may follow the lead of Engage Technologies
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which is majority-owned by CMGI
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It strips personal information from "clickstream" data, she said.

But many privacy advocates are pushing for legislation or rules that would allow ad firms to plant cookies and otherwise track users only when individual consumers volunteer for, or "opt in" to, such programs. The industry prefers an "opt out" approach, which allows users to decline being tracked.

"So many companies want to have a free ride on a person's data and be able to use that data without informed consent," said Evan Hendricks, editor of Privacy Times.

While legislation may be a longshot in an election year, Hendricks said he is confident lawmakers will introduce legislation "based on fair information practices" before long.

Sen. Richard Shelby, R-Ala., announced the formation last month of a bipartisan congressional privacy caucus, which he said would serve as a "legislative advocate" for personal privacy.

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